Government Operations Committee on Oct. 4th, 2011

[The Chair, NDP, Pat Martin]

Actually, Mike, did you want to take a round before we conclude? This will end this round.

[Mike Wallace, Conservative, Burlington, ON]

I have a couple of general procurement questions, if you could answer them for me, Mr. Sobrino.

Do you have any idea, as a department, what the actual cost to the taxpayer is to have projects tendered? The reason I am asking is that we have had contracts up to $25,000 not being tendered. I think everyone assumed that was at the top level, that everything was at $25,000, which obviously is not the case.

There are lots of smaller things you would not tender for because I'm assuming there is a cost to doing a tender. During my days in municipal politics...I know that by the time you advertise, promote what you're doing—you have to qualify the bidders—it takes time and effort. It is good public policy, but at some point it's not that cost-effective.

Do you have any idea what it costs to actually do a tendered program?

[Pablo Sobrino]

I can't comment directly, but I can say that we take into account two things when these policies are being developed--the cost to the taxpayer of carrying out the transaction and the cost to the supplier as well. If a supplier has to spend $10,000 to prepare procurement documents for a competitive tendered process, it isn't worth the investment the supplier has to make in order to engage there.

In terms of the low of $25,000, it is true that you can go directly to what would be called “sole source”, but we encourage and promote the use of standing offers. We go through a large procurement process to put in place standing offers so that we get best price and availability for a particular area. This is what the commodity management strategy essentially is about. It's about developing the right framework for that. Once we've negotiated that, then a government department can access those low-dollar-value things off a standing offer list.

So that would be one mechanism. The other mechanism is that even though we don't go to a full tendered process, client departments are expected to get the best price. You would get quotes from three different sources and pick the best price for those things. Those would be even for a credit card purchase, because we want to minimize the transaction costs on the departmental side as well as the supplier side.

[Mike Wallace, Conservative, Burlington, ON]

Thank you.

My colleague Mr. Armstrong may have some questions in my time slot, if he wants, Mr. Chair.

[The Chair, NDP, Pat Martin]

We have him on for a slot later, if that would be agreeable.

[Mike Wallace, Conservative, Burlington, ON]

Oh, you have him on later?

I'm done, then, Mr. Chair.

[The Chair, NDP, Pat Martin]

Thank you, Mike.

There are two speakers who would like to ask questions. Then we'd like to wrap up at about ten minutes after, because we have to go in camera to discuss future business.

Mathieu Ravignat, five minutes, and then Scott Armstrong.

[Mathieu Ravignat, NDP, Pontiac, QC]

My questions will be brief.

First of all, thank you for your important work. I think it's really essential work. Second, congratulations on the first-year anniversary of the website.

I'm going to build on some of the questions of the chair and make it brief, since he did cover it quite well.

As you may know, Canada is going forward with quite an aggressive international trade thrust, with up to 50 new trade deals maybe. My concern is about the Canadian competitive advantage in this situation.

You're on the front lines in this regard when it comes to procurement, so if we can imagine all of these trade deals, the pressure on you in order to ensure that Canadian companies get at least a good fair share of that pie will be much higher. Do you feel you have the tools right now to function in that kind of highly competitive environment that's coming soon?

[Shereen Benzvy Miller]

I can't actually comment on the trade policies and all that. What I can say is that the Office of Small and Medium Enterprises does enjoy really good relationships with other departments, such as the Department of Foreign Affairs, and our counterparts in the United States, such as the GSA and the U.S. SBA. Between the work we do with our client departments and the work we do engaging suppliers, we find that we get a lot of the needs defined for business intelligence that businesses need.

As we educate and help to essentially allow small businesses the tools they need for understanding government procurement, we hope that the lessons they learn with us they will be able to apply in their businesses elsewhere. But we really focus on the Canadian federal government community.

[Mathieu Ravignat, NDP, Pontiac, QC]

Just as a follow-up question, I would assume you're aware of the strategies in place in other countries to get access to certain contracts and procurements. Do you actively monitor those efforts? Do you inform the public, as well as perhaps the minister, of those strategies? If so, how many resources do you allocate to that kind of monitoring?

[Pablo Sobrino]

Just to be clear, I really can't comment on trade agreements. However, I can say that we do monitor procurement internationally. In fact, we participate in a trilateral chief procurement officers meeting. The U.K., the U.S., and Canada meet annually to discuss the issues we face. We do that kind of work.

We certainly support our colleagues at Foreign Affairs and International Trade in terms of impacts on the system that we see may happen, but again, I really can't comment on where we are in terms of positioning. We do monitor what's going on, because we know it has an impact on the procurement system.

[Mathieu Ravignat, NDP, Pontiac, QC]

Thank you.

[The Chair, NDP, Pat Martin]

Is that enough, Mathieu?

Scott, if you'd like, a five-minute round.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Thank you.

Thanks for your presentation. I found the whole time very riveting.

The information I have is that 43% of total contracts awarded by Public Works were to SMEs. That sounds pretty good, but when you look at it over time, there's quite a fluctuation. In 2004-05 it was 34%, and in 2007-08 it was 49%, for a 15% fluctuation. I'm concerned, because small businesses can't depend on the same amount or the same percentage every year.

What causes this fluctuation?

[Shereen Benzvy Miller]

If I could just specify, that's contract volume by value, but the fact is if you look at the overall amount of money that is awarded to small and medium-sized enterprises, it has been increasing. Really, at the end of the day, my experience with small and medium-sized enterprises is that their concern is the size of the pie in terms of value. The number of contracts is of less interest to them as a performance measure. That is just the feedback I've received.

But we do monitor that, because sometimes the percentage that small business gets is affected by things like Afghanistan. If you are engaging in a lot of large military procurements, then obviously the percentage by volume or the number of contracts that go to small businesses may decrease.

It's not a number that worries me; it's a number I watch closely to try to understand what's happening to ensure we are cognizant of the various things that procurement may or may not be doing to help SMEs.

So yes, I think it's a good number to keep track of, to keep an eye on and keep asking questions about, but really it's the dollar value they're going to care about in the end.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

When large Canadian companies do get contracts, they very often have to subcontract. Have you any idea what percentage of total contracts issued by the Government of Canada that SMEs eventually get? If they're getting 43% of the contracts, that may actually be over 50% of the value, based on getting subcontracts from larger--

[Shereen Benzvy Miller]

Or over 70%.

The answer is no, I do not have specific figures, and that's partly because we have no lens into the third-party agreements. Those are commercially confidential figures. We have no way to know how much businesses contract out or what their supply chains look like. We don't have figures on that. But from our discussions with businesses, with all kinds of suppliers, I think there is a very healthy proportion that is obviously necessary as a result of supply chain needs.

We don't have a figure to give you.

[Pablo Sobrino]

I might add, though, that because we are trying to increase the amount of data that's available out there, what a small business will be able to see, especially regionally, is that a company has an arrangement in place, and getting the business may be about accessing that company and becoming part of the supply chain for that company, as opposed to coming directly to the Government of Canada. By making that information more available and transparent, people are able to make those kinds of decisions and arrangements, which are outside the scope of what we do.

Certainly the information is there—business intelligence, I guess you'd call it—so businesses can make those kinds of arrangements and be knowledgeable about how they can access those businesses.

[Shereen Benzvy Miller]

It's on buyandsell.gc.ca--contract history.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

So it's transparent.

I have just one question about transparency. I realize that to do all this work and collect the data you probably have to work pretty closely with the government departments, because they must be able to give you this information. Have you had trouble getting information from some departments compared with others, or is everybody pretty open to this?

[Shereen Benzvy Miller]

We have had no trouble. We conveniently, within the acquisitions branch in the client engagement sector, have a program called the spend analysis program, so we actually get all of the spend data from all of the departments. We are able, then, to look at and drill down quite specifically into what's been spent on what contract, in what area, in what marketplace, in what industries, and with which companies. So we have a lot of information, and departments have been very cooperative.

So far we get information from about 85% of the spend, a big chunk of the departments. We don't have some of the smaller departments signed up yet in that program, but we're able to extrapolate to full government data on that.

[Scott Armstrong, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Thank you.

[The Chair, NDP, Pat Martin]

That does wrap up our time, Scott.

I see no further questioners, so I'm just going to thank our witnesses for joining us from the Department of Public Works and Government Services, Mr. Sobrino and Ms. Benzvy Miller. It was very useful. We'll see you again on Thursday, I believe.

If I could ask committee members to stay put for a moment, I'm going to suspend the meeting and we'll go in camera to deal with an item of future business. We'll clear the room of guests because of the in camera status, please.

[Proceedings continue in camera]